Friday, 30 September 2011

Dull day?

US Cattle 30 September 2100
Today there is not much happening. I have to pinch myself as I write those words. At one point the FTSE was down 122 points and it ended almost 70 points down. And the Dow Jones has been 158 points down. In the days when the stock market made sense, movements like these would be rare and would have signalled something amiss. In the past few months they have become everyday events. I think that is a massive signal that something very bad is happening and we need to worry. In the mean time I can report that the markets continue to dither inside their trading range. But let's not forget that that range is almost 7% from top to bottom. It's almost 9% if you include the two intra day downward spikes to 10600, as a friend has reminded me. I speak of the DJI. The rather more untidy FTSE has a range of about 10.5%.

As gold and silver fall and I lick my wounds I think to myself this is what I am doing to assuage my growing fear about a calamity to come. Much is written about the dangers of buying exchange traded funds because they are poorly regulated and they rely on paper trades. Paper trades, by definition, have counter parties who may go bust and fail to divi up when the shit hits the fan. I agree it is a worry and I would not rely entirely on ETFs that are structured in that way. For my gold and silver the bulk of my holdings are in PHAU and PHAG. The producers of these ETFs swear that they hold actual gold and silver bars and a list of those bars is available on the internet. They are kept in vaults that belong to reputable banks. At times when I was feeling particularly paranoid I bought a version of their ETFs which held its gold in Swiss banks. The argument goes that there is a risk that when the S really hits the F solid western Governments will start to confiscate gold. I am not immune to paranoia but I don't I have the lightness of foot that I would need to cope if life became that bad. So it's best not to think about it.

To lighten the gloom of that last paragraph I can report that my friend the spider has had a good day. Two flies and a fair bit of exercise hauling them in and repairing her web. Also COW is starting to do its stuff and I have made 3.6% in about 10 trading days. Now that is a normal world. The fundamentals look good and the price is chasing after them. First area of resistance has been broken. We must now watch the second. That's my chart for the day.

Have a good weekend. Here in the West Country the weather has been beautiful. Lets hope it lasts a bit longer. I've always liked September.

Thursday, 29 September 2011

Fear is out there

Citigroup share price compared to DJI end March to present
I've caught that falling knife and my hands are soaked in blood. Silver and gold are sliding gently downwards. With silver there are some support levels round about here but you have to go back to the turn of the year to find them and they aren't especially convincing. With gold I am forced by desperation to draw a Fibonacci retracement and hope that the nearby 78.6% level represents some sort of bottom. Frankly it's whistling in the dark. No question, I should have stayed away from these blessed precious metals but now that I'm in I dare not let go until the pain gets too great. And then you'll see me walk away. Or the true state of the world's economies will catch up with investors' imagination and we'll be back on our way to the $2000 level for gold.

I have taken some profits on my short S&P so I have stopped being stupid about the indices and will wait till the market reaches the top of its travel before I go short again. (See post from Tuesday when I gave myself a sharp rap on the knuckles.)

Today's chart provides a different take on the market. It compares the price movement of Citigroup, the US bank, with the DJI. It shows that investors are worried about the health of the banking sector. You could look at pretty much any bank and you would get a similar picture. Investors are shunning a sector that is vulnerable to disaster. The prospective PE for Citigroup is 6.55. I prefer to look at the reciprocal: the earnings yield which works out at 15% a colossal figure which either indicates a fantastic bargain or the fear that something terrible is about to happen. The chart shows that from May onwards investors have been dumping the stock so I put my money on the terrible option. The left hand scale shows that while the market as a whole (the thick blue line is the DJI) has fallen by 10% since end March Citigroup has fallen by 40%. Barclays RBS and Lloyds have all fallen by about 45%. Only HSBC and Standard and Chartered have done slightly better with falls around 20%. My interpretation is that the fear is out there but it is obscured by all that cash that governments have poured into the hands of speculators who are making hay. Let's pray that it doesn't all come to a horrible sticky end.

My little friend
There is a spider that sits beside me while I watch the markets. She lives on her web that is just outside my window. It seems to be a great place to live because she catches flies two or three times a day. The rest of the time she sits very still. Perhaps I should learn from her. Only move when it's worth your while. My picture is a bit fuzzy because I failed to defeat my camera's automatic focus which looked at the window and not the spider. But she's a good friend.

Wednesday, 28 September 2011


A very rushed post today because I have almost no time.

The indices are mid channel and are bobbing up and down. I took the opportunity of an early fall in the FTSE to sell my SUK2. As I explained yesterday I should never have been in it. I still hold a bit of short S&P 500 so I have a bit of profit from the afternoon fall which I was unable to watch because I was out walking on the hills. I should take profits before the night is out.

I'm worried that I may have caught the falling knife in gold and silver rather than buying a bargain. But I am holding on and licking the blood off my fingers.

Cow is doing all right today so I'll put that chart up today. Mostly to cheer myself up.

More time tomorrow.

Tuesday, 27 September 2011

Wishful thinking

I started this blog so that I could reflect on how I play the market. The very first words I wrote described conditions as ugly. It is not a market that suits me very well. I like to use fundamental data to find undervalued shares. That is impossible at present. But since I am not temperamentally suited to sitting on the sidelines I try to engage. It is hard to play but I have the tools and the understanding to do well even in the present circumstances. But my ego gets the better of me. I believe that market should go down and that blinds me to what is staring me in the face.

Just look at today's chart and what I said yesterday when the UK market closed. The DJI chart shows that the market is being supported by that line I drew days ago but it is reluctant to rise so I put my money, but not much of it on a continuing fall. Or is that spike in volume on Thursday the harbinger of a change in direction? Everything was telling me to bet the other way except for my arrogant belief that down was the right way to go. Too late now. But please, please let me learn from my mistakes and go with the odds.

Gold and silver are another story. The charts are no help here. It is just a best guess on whether the fall is over. I've put money down in the hope that I have not caught a falling knife but instead I have bought myself a bargain.

I am writing this to the sound of Madeleine Peyroux. I have only just discovered her lovely voice. She is described as a twenty first century Billie Holiday. The throatiness of her singing is reminiscent of the magnificent Billie. But Madeleine's is a little softer. She spent some years living with her mother in Paris and sings in French as well as in English. She began singing in the streets of the Latin Quarter as a busker. What a way to start a career. Some of her songs come from Edith Piaf's repertoire. I am currently listening to her wonderful rendition of J'ai deux amours.

Monday, 26 September 2011

Woe, woe and thrice woe

Pundits are falling over themselves to explain the collapse in gold and silver prices. I admit that, against my better judgement, I have been reading some of the proffered explanations. What else can you do when the market falls into the hands of a bunch of  inmates from a mental institution who have escaped en masse. I promised myself never to do it again after some sessions looking at bulletin boards to try to fathom why a favourite share was being washed down the plug hole. The fantastic nonsense that I found there was unbelievable, literally. A whole group of people whistling to each other in the dark. Not a shred of real evidence offered to explain their far fetched theories.  Back to today. The two most interesting fantasies that I found were

  • nobody has obligations denominated in gold so they have to sell it to raise cash to repay their debts
  • governments worry about the public reaction to a gold price above $2000 so they are putting the fear of God into gold bugs by selling the gold market. This one has a rider - that they won't be able to hold the line for long and a massive reaction will follow sending the gold price into the stratosphere. 
  • Silver reacts even more than gold in this scenario because it is a thin market. 
The silver price movement really is frightening. It has fallen as low as $26.17 which is close to half of its all time high of $49.86 which is where it was just 5 months ago on the 25th April

I stick to my baby thrown out with the bath water theory for precious metals. And I have been punished for thinking that the bottom had arrived late on Friday night. What I bought then (only a tiny bit) has been devastated by today's movement. And my assumption that the stock market had resumed its fall this morning when the UK market opened (again a small holding) was washed away in the upward tide that followed.

Today must be marked down to a not very happy experience. Never try to catch a falling knife - they say. But you don't always know it has stopped falling. If you don't jump with too much cash and if you avoid leverage, you can bear the consequences of your mistakes.

So what can we say about tomorrow. The DJI chart shows that the market is being supported by that line I drew days ago but it is reluctant to rise so I put my money, but not much of it on a continuing fall. Or is that spike in volume on Thursday the harbinger of a change in direction?

Visitors this weekend and I prepared a nice little pork and prune number. Recipe for those of you who are interested was:

  • Cubed pork (none of the ready cubed pork on the shelves in Sainsbury's was marked as outdoor bred so I got the instore butcher to cut me up a leg joint.) I honestly don't know the weight but guess it was about a pound and a half
  • A couple of onions roughly chopped
  • About three quarters of a bag of chopped prunes
  • a pint of port and white wine mixed
  • a pint of chicken stock (I use Knorr "Touch of Taste")
  • Olive oil for frying
  • Small handful of juniper berries
  • A heaped serving spoon of flour
I fried the onions very gently in a casserole pan, and the pork separately in a frying pan till it was brown. I then tipped the pork into the casserole and added the flour and cooked until it was absorbed by the oil and other juices - still on low heat. I then added the wines, the stock and the prunes and raised the heat until the the liquid was boiling and then added the juniper berries. I then put the casserole with a lid on  into an oven at 180 degrees and cooked for two hours. This reduced the liquid to a wonderful black sauce. I reheated in time to eat and added abit of water because the sauce was a bit too thick.

Friday, 23 September 2011

All that is gold does not glister

Silver 230911
Both gold and silver fell through support levels in a spectacular manner. I show the silver chart because it is more dramatic. But go back a few days and you will see that the potential double top is now confirmed for gold. I have scurried to drop my holdings.
I have also closed out my index short position with a super profit. I may reopen a small position before the US market closes to take advantage of any bad news that comes out over the weekend. But I do have to be fearful of good news.
I have a dear friend who is keen on the more explosive bits of the stock market and he has tempted me away from the straight and narrow path. He has introduced me to some derivatives called covered warrants. They can be bought like shares and can be held in a SIPP. Society Generale, a French bank issues a slew of them and I have popped into the bookies and bought one whose code is SN13. It expires in the middle of next year and unless the price of gold goes up it expires worthless. In the mean time its price magnifies the movement in the price of gold massively. If the price of gold reaches $2000 by mid December good old SN13 will rise in price by 93%. My friend was very excited when he saw this figure. I prefer to think first about how much I could lose and bought a quantity where I could live with losing all my money. I see it as an experiment from which I can learn. So far it has taught me that you can lose a lot of money quite fast if you really want to.

Out to lunch today in the Oxfordshire Cotswolds. Lunch was cooked for us by a lovely 94 year old lady who managed to produce a roast meal using only a microwave. An astonishing feat. Her son and daughter have disconnected her cooker because of the number of fires that it started.
Being out meant that I did not watch the gold price fall. But I pulled out when I phoned to check on the American market open. I then discovered something was amiss. My cash holdings are now up to 97% with just a few petty holdings: in COW, those warrants, and a position that I have held for far too long shorting US treasuries. I will keep a sharp eye out all evening for a possible change in direction and will act accordingly.

Thursday, 22 September 2011

Out goes the baby, along with the bathwater

£ to $ exchange rate (pound falls graph points down)
A strange day today. Dump everything was the mood:

  • Dow down 368 points at time of writing. That's 3.3%. 
  • FTSE down 246 4.6%! (remember that part of this is catch up from last night).
  • Silver down the best part of 7%
  • Gold down about 3%
This is not normal trading. Fear of any kind of economic meltdown should favour gold if not silver. This is just people throwing the baby out with the bath water.
I did very well yesterday with my shorts and a bit of help from gold and silver. Today the shorts have made me a packet but this was offset by a big loss on silver and some more on gold. To be fair there were some who were expecting this fall in precious metals but I did not listen. My inclination now is to hold on but, as ever, I may turn on a sixpence (I use this expression to show how old I am.)
Then there's the tricky decision about whether to take profits on the shorts or to let them run. Again the interim decision is to hold on.
And then there's the dollar.  I've made a lot as the £ fell against the $ as shown in today's chart. The dramatic fall today 1.6% (massive for a currency) Is part of this dump everything mentality. Luckily I hold a sizeable chunk of my cash in cash dollars and I also hold dollar assets.This has been generating a decent profit in its own right. And will do so again today.
Current disposition of my portfolio is 15% gold and silver, 3% commodity, 20% equity shorts, 63% cash.

Wednesday, 21 September 2011

An imperfect market

FTSE 210911

Today's post is a little different from normal. I notice that I have not put up a chart of the FTSE for some time and today I rectify that. The reason I pay it little attention is that at present  its movements are pushed and pulled by the American markets (but I have to admit it has a very pretty channel). Because the UK market opens earlier than the US and closes earlier too the relationship is obscured. I watch the US market futures through the morning and in the early afternoon to get an idea where those markets will open. But I cannot make any sensible  guesses about the future  based on the UK market. It's definitely the dog's tail and the dog is wagging it.
The same rules apply once the UK market closes. Let's say the UK market closes strongly up and then the US markets suffer a fall in their afternoon (our evening). You can be reasonably sure that the UK market will open sharply down. Unless the futures market indicates a US recovery, in which case the UK market will be pulled up at the open.
 At the moment this tether is very strong indeed and it means that there is little point in watching the UK market for any sort of guidance.
I believe that the markets are being moved by what used to be called hot money. This time that hot money has been supplied by governments through quantitative easing and is in the hands of speculators who look exclusively at price movements and no deeper. The banks and institutions in whose trading rooms these speculators work have deep pockets. And to make things worse they have no fear of failure. If they fail they believe that governments will step in to pick up the pieces. Some may lose their jobs but what do they care they've already stuffed their boots with loot.
In this febrile atmosphere there is no attempt to move the markets in the direction of an equilibrium based on its real value. I think we can reasonably say that what we have a frighteningly imperfect market that has lost touch with reality.
You may have noticed that I have not mentioned shares since I started this blog. At present there is no point in looking at shares since the scenario that I have described above leaves no opportunity to search for shares that are undervalued and therefore should rise in price. For me that's the only point in buying shares . I know I'm good at finding undervalued ones. The present market is a free for all and it is impossible to calculate the odds on being right.
I have two choices: to stand back; or to join in the melee by trying to understand its tos and fros.  The latter is what I am trying to do. Today I'm lucky. Most days not.

Tuesday, 20 September 2011

The best laid plans of mice and men

US Cattle 200911
Today those plans did go awry. The markets took it into their heads to make up the ground lost yesterday. Luckily I was out when all this was happening so I did not have the chance either to worry or to attempt to deal with a problem that had no real solution. Positive point at time of writing is that the DJI has kissed the resistance line and has not moved on.
I am going to be bold and buy some more shorts on the US markets. After all, silver and gold have repaid my patience as has COW. This will be my chart today. I bought when that long resistance line was breached. Then there was a worrying pull back but now the price has broken up a second time.

My reason for being out today was a long awaited follow up appointment at the hospital. I was in hospital some months ago for a period of two weeks. I had an illness with severe neurological symptoms. It remains undiagnosed but the symptoms have abated. I had hoped that the follow up would involve a kiss and goodbye. But some autoimmune antibodies which appeared while I was in hospital remain and are serious enough to warrent further investigation despite the fact that I feel 99% better. So more tests and appointments are in the offing.

Monday, 19 September 2011

Volume Spike

The chart of the DJI shows a number of volume spikes and each time there is a spike it is at or about the time of a major change in direction of price movement. This is what happened on Friday. I jumped on board shorts at UK and US opens despite the fact that by the time each market opened there had already been a big move. Nevertheless I am hoping that the fall will continue for at least a couple of days. We have also had a bounce down off the top of the channel so the hope is not unreasonable.
Elsewhere I was suckered into a silver rally that came to nothing and ended in a rout. Gold ditto. I am holding on gloomily.
The COW position looked bad at the outset but has recovered somewhat so I am holding on.
All in all a dismal day for me. I wonder if I should just give up chasing on the basis of hope in a market that is going nowhere. Pile up my money and wait for a market that has a clear direction one way or another. Lets just hope that the spike signal (which does not always work) will provide some profit.

Friday, 16 September 2011

Silence is Golden

These days when I have almost nothing in the portfolio are eerily silent. No dramas unfolding as I watch my portfolio value. A feeling of peace.
But the market moves on.

  • That support line on the gold price chart has been broken but its power remains. Gold price has broken back above the line showing that I should have had more faith. 
  • Silver is also pulling back towards its broken support levels.
  • The Dow Jones is in some ways the most interesting chart for it powered up to resistance and then pulled back.
  • The S&P is above both the resistance lines that I drew but is also pulling back
If I had the balls for it I would be buying back my shorts because the market is moving as my analysis forecast. I may do, later this evening and then in the morning in the UK. You see what I mean about the pain of trading. But as I've said before I can't afford to lose unlike the chap in the UBS who was playing with other people's money.
My COW speculation is looking a bit sick and will have to go if there is no improvement by tomorrow.

Vegetarian guest tonight and I have cooked a  Tagine adapting from a lamb recipe. I am not a great one for specifying quantities but the recipe is a bit like this:
Canned chopped tomatoes (2 tins)
One large onion
Garlic to taste (I taste a lot)
Dried apricots (large handful)
Pitted dates (a few, chopped)
Can of chick peas
Frozen broad beans
Frozen soya beans
Vegetable stock

SPICES: Coriander, cumin,  cardamon, clove, cinnamon, nutmeg, turmeric, black pepper
salt to taste

I fry the onion, roughly chopped, slowly and then add garlic (crushed). Then add all the other ingredients at pretty much  the same time. It doesn't take much cooking - say 15 minutes. It's a good idea to prepare it in the morning so the ingredients have time to fuse their flavours. Then reheat, add a bit of water if necessary. I'm quite heavy handed with the spices.

I serve it with couscous decorated with pomegranate seeds.

As I finish writing this I see the Dow is creeping up again. Hold hard on buying those shorts.

Thursday, 15 September 2011

Never be afraid to cut and run

S&P 150911
A bleak day for me as gold dropped to its support line. I dumped my remaining market shorts (too late for the FTSE) and I weeded out more of my silver. But he who fights and runs away lives to fight another day. And I have not lost too much. Still only 5% down since April and I have loads of cash. My day will come.
So what's happening. The markets are rallying but they're all inside their channels. I should pay far more attention to those lines I draw on the charts because they do work. I could make more money and lose less if I watched them more carefully and did a bit less wishful thinking.
I've done it again today. Gold touched the support line and bounced off (see yesterday's chart) and then came back down again. As I write it's sitting on the line. And starting to pull back a bit. But I've sold a chunk of my holding because I don't have the nerve to wait for it to break down. And I've been listening to too many doomsayers.This evening and tomorrow will tell if I was a coward or if I was wise.
As for the indices:

  • the FTSE is well inside its channel despite its strong rally
  • Ditto the Dow Jones
  • the S & P has broken one resistance line and is touching another (Today's chart)
Result: all bets off on what happens next. I've taken most of my money off the table.
A friend has brought the cattle situation to my attention and it does look promising. Since nothing else inspires confidence I have bought an ETF in live cattle in the US (COW). I might do a chart tomorrow to show the opportunity.

The dog had a hair cut yesterday. He hates the process but loves the effect. He is getting very old. We got him second hand from a rescue some eight years ago and at the time the vet gauged his age at six or seven so he could be fifteen or even sixteen. It seems he was ill treated before we got him and he tended to snap. But life with us has mellowed him. He is showing his age now and probably has not many months left. He is a mixture of various kinds of dog but no-one we know in the dog world can identify what goes into that mix. Tibetan Terrier is the best they can come up with, but he's long and sags in the middle.

Wednesday, 14 September 2011

Golden days

Gold 140911
I jumped ship on my US shorts as soon as the market opened. It was a lucky break for the market powered ahead towards the top of the channel and I came away with a bit of profit. In hindsight I should have given up a day earlier. I was less lucky with my silver. I went back in modestly as the price strengthened during the evening.  Only to pull back this morning. No profit there but no big black hole either.
A reader has asked for a view on gold so here goes. It's a tricky one.
The main problem is that gold has run up fast and is a long way from the 200 day moving average (thick red line). That line will act as a magnate and pull the price back towards it, or slow down price action so it can catch up. The price action is only about 2% away from the support line I've drawn (blue line) so we will know more when that support holds or not. The price has definitely lost momentum and there is what looks like a possible double top (not a good sign). On the plus side is the fact that the bull market has got legs and has weathered pull backs like this many times before. Also there is the likelihood of a major negative financial event any day and that should give gold a lift.
For what it's worth I'm hanging in there with a chunky part of my investment. I could change my mind at any time and there are people out there saying gold is in for a substantial pull back. Watch that support line!

For what its worth I'm hanging in there till the charts tell me not to.

Tuesday, 13 September 2011

Dump Silver

Dow Jones Index 13 September 2011 5pm (GMT+1)
Am I being too weak? I ask myself. Should I have heeded my instinct instead of waiting for silver's fall? I pulled out of a big part of my positions as the price recovered temporarily during the day, suffering a small loss. 
My finger hovered over the sell button for my index shorts before I relented. This is what this blog is meant to be about. The pain of trading. Many people have written reams on the subject of mechanical trading methods, particularly for very short term trading using margin. But I have never seen any one of them say what  they achieve by way of return on capital, year in year out. So I prefer to suffer the pain and make my judgements. My pain is caused because we are at tipping points. 
I am a bear on the indices and they have broken some support levels and bounced off others (see chart). This means that they are due for a bounce back into the channel or they have broken down and will fall massively. Don't want to miss that again.
Silver is approaching the apex of a triangle (see yesterday's chart) and could shoot out either way. Don't want to miss a rise, don't want to be clobbered by a fall. The risk here is too big so I have pulled back and hope I will be able to jump back in.

Saw stunning play last night at Theatre Royal in Bath. Three Days in May tells the story of how Churchill outmanoeuvred Lord Halifax and avoided capitulation to Hitler at the time of the surrender of France. The world would now be a very different place had he failed. Warren Clarke gave a faultless performance as Churchill which was powerful, yet restrained. Chamberlain was a broken man about to die and making a final effort to repair the damage  caused by his errors of judgement. Robert Demeger calmly conveyed his pain as Chamberlain decided to side with Churchill against Halifax, the appeaser performed by Jeremy Clyde.
This was a beautifully paced drama written by a very talented young writer Ben Brown, who was poorly acknowledged in an otherwise instructive and interesting programme. It was a play that told its story clearly and well and left the audience much better informed as well as satisfied at the end of the evening.

Monday, 12 September 2011

Roller-coaster ride

Yet more massive fluctuations. Look at these numbers

  • Silver 2.5%
  • FTSE 2.1%
  • Gold 1.75%
  • S&P 1.5%
  • DJI 1.25%
Those were the variations up and down during the day for these commodities and indices. Not the move on the day but during the day. This is a terrific bear vs. bull battle. Conspiracy theorists, no doubt, would claim that the market was being manipulated. I have no doubt that there is a lot of money being made by institutions with deep pockets and no fears of losing money because they know they will be bailed out. (Moral Hazard was a term popular at the time of the bank bailout and now we know what it means. When the shit hits the fan there are going to be some banks caught holding the fuzzy end of the lolly pop.)With that amount of support they can ride these enormous waves indiscriminately. Lesser mortals like myself have to mind our pennies and make sure we are on the right side of the market in the longer term.

My big worry is silver. The movements are so dramatic and it is so easy to lose a lot of money if you temporarily get it wrong. Gold is less worrying since moves are slower and you can get out less badly burned. Likewise the indices. My hunch is that they will fall. (This was reinforced by a walk round our little local market town. I have never seen so many empty shops. Not even during the 2008 debacle.) But at least if they bounce, there is time to get out. I bought some more short FTSE today (SUK2). And held onto my silver despite the turmoil and a fit of nerves.

Theatre again tonight. Report tomorrow.

Saturday, 10 September 2011

Choppy waters in the Channel

Today's chart (click to enlarge or right click and open in new window to see chart and text at the same time - back to return) showing the S&P 500 over the past 6 months, is useful since it illustrates how I attempt to read the market.

  1. The thick red line is the 200 day moving average. I pulled out of the market as it flattened off and as the price action lost upward momentum. I also built short positions as the series of sharp drops occurred. (I foolishly closed these out as the really big drop began and did not return. (I listened to the news instead of watching the charts) I hope I have learned something from that.) Now that the market is well below that line there are two possibilities: either we have entered a new big down phase (the red line should start to point downwards to confirm that); or it will act as a magnate for price action and we will see a seasonal winter rally.
  2. When prices shot up at the end of the sharp fall (brown arrow) I worked on the principal that we were in for a V shaped recovery I had a huge bottom fishing campaign in US, UK and HK. Initially I made a lot of money. But when it reached the top of its movement and retraced (blue arrow). I lost it all and then some. (another lesson learned. I hope).
  3. Prices then started to move violently inside a channel (Yellow parallel lines). I have attempted to make money on the down movements inside that channel by taking out short ETFs and so far this has worked but it has required trading that was quick off the mark.
  4. I have spotted an alternative interpretation of price action (grey lines forming a triangle) I now need to be aware that these lines may be the places to buy and sell.
When the US market opened today I bought more shorts and made some money. But it has been another roller coaster day. The indices have moved erratically as have precious metals. Silver in particular has been a frightening ride. The very high volumes show that a big shift in share ownership is occurring. It is not yet clear whether it is the bulls stocking up for a rally or the bears clearing out ready for the fall. Small investors are bound to suffer either way.
My Current portfolio position is precious metals 25%, short positions 11%, cash 64%. I am making slow progress in recovering the losses described above. But at least I am outperforming my benchmark, the FTSE, which is down 13.2% since April (the start of my trading year). I am down just 3.5%.

This post is late since I was at the theatre in Bath last night. Not a brilliant outing. The play was a Chichester Festival Theatre production of The Syndicate by Eduardo de Filipo It is a piece, from an earlier age and a different culture (Neapolitan commedia del arte). It has a huge cast, many of whom added little or nothing to the plot, and long wordy speeches. It is an amoral examination of a top Neapolitan Mafia family. 
Eduardo de Filipo was Italy's major dramatist for much of his life which covered three quarters of the twentieth century, and was a friend of greats like Frederico Fellini. He is extremely well regarded.
Ian McKellen did his best to hold the play together, though he did lack the menace one might expect of a Mafia boss. He was not helped by a dismal set. At its worst it seemed to use cardigans to hide the pictures on the wall. The same background obscured by long see-through curtains was supposed to move the action from one location to another. But the real disaster was Oliver Cotton who failed dismally in a pivotal two handed scene with McKellen. From that moment the play lost all credibility and interest. Michael Pennington soldiered on bravely as the second lead (as McKellen's hard done by doctor) but he could do little to rescue a sinking ship.

Thursday, 8 September 2011

Blowing in the wind

Back into precious metals with a vengeance. I'm glad that I picked up that silver on the American market last night. The silver I bought on the London market this morning was at a lower price than when I took profits a couple of days ago. For gold I had to pay a slightly higher price than I got for it yesterday, but yesterday there was no clue that the fall would be short lived. So I'm not unhappy with those trades.
Much harder was deciding what to do about index shorts. The signal I used was on the S&P which, in overnight trading on the futures market, kissed a resistance level and fell back. This gave me the courage to buy back some shorts as the American market opened weak. However, as the American morning progressed the battle between bulls and bears was ferocious and I had to live through some scary moments. I have included an intraday chart to show this. It is still hard to know whether I have done the right thing. This evening may tell.

Wednesday, 7 September 2011

Did I say dull?

The indices are moving comfortably inside their channels but the movements are huge. FTSE is up 162 points (3%ish) and the Dow is up 204 points (almost 2%). Those bulls are there and am I glad I dumped my short ETFs yesterday. But I dumped some more as each market opened. I am learning to grab profits when I can. But I am not there yet. Not enough confidence in my judgement! I also relinquished most of my gold. That was a decision after the event but in these volatile markets you have to go with the flow.
I had another lovely lunch out today( Kempsford this time, where they have done a beautiful restoration of their church ceiling) So I set up my sale of short Dow ETF (DXD) before I went out. 
When I got home I found that silver looked promising, a nice bounce off a support line. I was too late to buy my favourite PHAG on the UK market so I went to the US market and bought AGQ a leveraged silver ETF. (PS It was only this morning I spotted that there is a resistance line that I need to take into account when planning my next move with silver. It is now included in the chart.)
I started the day 95% in cash, with the silver purchase cash dropped to 92% but precious metals is still down to 4%, the rest is my remaining shorts.
As for the market tomorrow, it could be up, it could be down. Inside the channel it's hard to tell.

Tuesday, 6 September 2011

Sell Away

The support lines have done their stuff. As soon as I saw that the FTSE was strengthening this morning and there was no follow through on the fall on Wall Street in the futures market I concluded that the support lines were bringing out the bulls. I sold more than half of my shorts on the FTSE (SUK2) and then more than half of my shorts on the DOW and S & P (DXD and SDS) as soon as the US market opened. (I was taken to lunch at the Moody Goose in Midsomer Norton. The food was fabulous. I thoroughly recommend it.)
I was very well fed but I was flying blind when I sold the shares but it turned out all right and I pocketed a healthy profit.
I also cashed in a decent profit on silver (PHAG). The market was weakening this morning after a poor performance yesterday and it was following something that looked like a peak.
Gold turned down after I went out so I had no chance to sell. Some of it will probably go tomorrow morning. I am sitting on a healthy profit.
With the indices back inside their range tomorrow may be dull but I intend to stay alert because this market is so jumpy.
I am now 83% in cash, 10% mostly gold and 6% in shorts.

Monday, 5 September 2011

When the Cat's Away

Wall Street closed for Labor Day yet still the market dip continues. The FTSE lost 189 points a 3.7% fall to touch its support line (see chart). The reason? You only need to look at the Dow Jones Index futures market. It is down 245 points following its 255 fall on Friday. That brings us down to 11000. It's below its current support line. Tomorrow will be very interesting. If there is no sign of strength when Wall Street opens, it means the bulls are in retreat, a sign that we are due for the next leg of the market collapse. But we're still 400 points away from the previous market bottom and renewed support. At the current rate, another two days of trading.
This morning I sold the very last of my equities.On Friday night I sold SI on the US market and this morning NESN on the Swiss market. I'm beginning to wish I had bought more shorts. But would I be too late if I bought now? I baulked this morning when I had a chance and the FTSE was down a mere 88 points. Will I have more courage tomorrow? The balance of my portfolio is now 20% precious metals, 15% short ETFs and 65% cash. A strong position which is generating reasonable gains.

Friday, 2 September 2011

Everything comes to those who wait

It's too early to say if the markets have changed direction. But last evening there was a signal strong enough for me to sell off almost all my stocks. The US markets failed to breach the 50% retracement level two days running. My sale was a rout, not a dignified retreat. Only in the UK did I come away with a profit. I also whacked up my holdings of short ETFs (SUK2, SDS, DXD). Those moves have paid off handsomely as today has gone on. All this shows one thing: In the present market, I am a bear at heart and I feel less nervous with down moves. However, I have to remind myself that today's price action only moves the markets back into their consolidation patterns.
Long may this last but I must not get overconfident. The bulls are still out there as is shown by the late afternoon price action. (GMT+1 time).
Gold and silver have done me very well today so my judgements here are coming right.
The balance of my portfolio now is 19% gold and silver, 6% equities, 15% short ETFs and 60% cash

Thursday, 1 September 2011

Bad choices

With the market still rising albeit at a reduced pace, the temptation to dive in is strong. But is this a trap ready to be sprung at the top of a rally? My picks yesterday were/are a disaster.They started fine but quickly reversed when the market turned weaker as the evening wore on. And with the exception of TSPT they continued weak today. I will leave the decision as to whether to dump till tomorrow. The natural reaction after a disaster is to sit still for a moment and that's what I'll do. Leaving the market alone may also be the right thing to do.
My portfolio has been helped by currency movements over the past few days. I hold US$, HK$ and Swiss Franc assets. All have fared well against the pound giving a modest lift to my portfolio value. The US$ and HK$ movements are cyclical but the Swiss Franc story is extraordinary (see chart). I just wish I had jumped aboard the train sooner.